Blog outlining massive fraud in the Australian listed investment company (LIC) and broader financial sector

Tuesday, 1 July 2014

The Fifth Element Resources Limited revaluation fraud

Fifth Element Resources Limited (FTH.AX) is a newly ASX-listed revaluation fraud masquerading as a gold explorer, as noted by this blog three weeks ago. The share price of FTH is openly manipulated, having been ramped from $0.20 to $2.30 in a month on no news. Prior to the ramp, an insider purchased 20m shares at $0.01 and the company conducted a sham related party capital raising of 20m shares at $0.20.

FTH has not fallen in price a single day of its existence, a track record as "perfect" as that of the Democratic Front for the Reunification of the Fatherland. According to ASIC and the mainstream media, this is not the result of a blatant market manipulation, but rather a marvellous but inexplicable magic market mystery. ASIC does nothing about market manipulation, allowing FTH to continue "trading" and attracting new victims, because according to ASIC market manipulation does not exist.

A revaluation fraud can be based on any type of business, or indeed an empty shell, as the real point of the scam is the manipulation of "market" prices. The purported underlying business is irrelevant. After manipulating purported "market" prices higher, ramped shares can be dumped on granny investors using fund manager associates. Alternatively, the ramped ASX-listed asset can be used to borrow against, with the proceeds then used for further manipulation. Throughout this, the operators and associates of such schemes collect real cash fees based on unrealized paper profits generated by themselves.

The problem for ASIC is that it has allowed this fraud to fester unchecked for decades, the cancer spreading to the point where its removal may not even be possible. It is not that the stock market tail is wagging the dog, the dog has been completely consumed, leaving nothing but a twitching rotting tail. The ASX is not a market with some elements of fraud, it is a fraud with some elements of market. There is no categorical difference between Fifth Element Resources or Intueri Group Limited (IQE.AX) or Veda Group Limited (VED.AX), they are on the same brownscale of fraud.

Most new Australian IPOs are now revaluation frauds, with investment cartels controlling the "market" outcome according to prearranged deals. Most IPOs in Australia are explicitly performed to create a controllable "market" price, not to raise money furthering an actual productive business with utility for society. Such scams commonly have the top 20 shareholders holding 95% of the shares outstanding.

6 comments:

Partly because the criminals' lawyers have done a good job suppressing this information. And partly because people don't care. This is not unusual. Harry Markopolos spent the better part of a decade fruitlessly warning about Madoff.